Consumer Debt Consolidation

Different consumers also differ in terms of dealing with their financial situations. There are various ways on how one could resolve his economic crisis and the kind of step to take always depends on the crisis that he is presently trying to overcome. As an individual, upon entering into a consumer debt consolidation program, the consumer would not be offered yet another loan to take. A debt consolidation has a large difference from a debt consolidation loan, which requires the debtor to take another loan to pay off his several other loans.

In a debt consolidation service, the consumer would experience negotiating with a debt consolidation counselor regarding his present financial situation and would then come up with a plan to be able to resolve the debts wherein both the debtor and the lender would agree. Through the debt consolidation service, the consolidation company would take care of all of the payment obligations of the consumer to each of the companies that he owes. These combined debts in one financial obligation naturally leave him with a lightened burden.

Consumer debt consolidation offers different ways to resolve a financial crisis and each one of them depends on the situation of the consumer. Below is a chance to go with the different faces of the solutions one by one.

Unsecured Debt Consolidation Loan

The debt consolidation service is now talking about loans, which is not very easy to get especially with a debtor that carries a bad reputation in terms of proper payment. But if one doesn’t have a home of his own or other valuable properties for that matter, this is one of the wisest ways to consider to be able to pay his debts. It doesn’t require any collateral obligations to put against the payables. But as it was stated, it isn’t easy to qualify for this kind of solution for it requires a clean record and a steady income from the debtor. Another disadvantage is that it usually gives the same or even a higher interest rate. The only good thing about it is the chance to get every debt all rolled into one combined and collected loan allowing only a single payment per month on the part of the debtor.

Credit Card Debt Consolidation

This kind of debt consolidation allows the person to transfer all of his debts into a single credit card. Three things should be considered to make sure that the debts are lessen and not remained as it is or even worse. The credit card debt consolidation should offer lower interest or none at all, that is 0%. It should remain valid and usable for a longer period of time before it meets the expiration date. To last for 15 months is a quite favorable length of time for this kind. Lastly, it should have lower transfer fees.

Home Equity Loan

This would let the debtor to get a cash-out of money putting the value of his own home at risk. With lower interest rate, this is a better choice than to continue crawling his way out of several other debts that usually go with high interest rates. The money from the equity must be used to pay the debts and nothing more. If the consumer borrows more than the value of his property, he could lose his own residence.

Home Equity Line of Credit (HELOC)

This is another debt consolidation method that put the debtor’s property at risk. The money can be obtained through a credit card or a checkbook. The consumer can withdraw as much or as little as he wanted provided that he would not get more than the set credit limit. Also, HELOC’s one advantage is its adjustable interest rates depending on the amount withdrawn by the consumer but with this kind of varying rates, it usually makes it hard to budget.

Every month of paying various different kinds of debts from different lenders with varying and often higher interest rates could be somewhat troublesome. The key to lessen these kinds of personal economic crisis is to get a consumer debt consolidation wherein it makes it easier to pay a single lump of financial obligation with a fix amount of interest rate.